Budget 2023: Higher taxes for offshore gas industry to fund cost of living relief

Major changes to taxation for one industry will bolster the government’s coffers as it seeks to help Australians doing it toughest.

The federal government will generate more revenue to fund its wide-reaching cost-of-living package by increasing taxes on oil and gas companies.

Tuesday’s budget will reveal an overhaul to the petroleum resource rent tax, which the Treasurer said would shore up domestic supply and “ensure Australia remains a reliable international energy supplier and investment partner”.

Met with acceptance by the industry, the government anticipates the changes will generate an extra $2.4 billion for the budget over the forward estimates.

Jim Chalmers said the extra taxes will fund a cost-of-living package designed to help the Australians doing it toughest, which could include an increase to JobSeeker for all ages – not just those over 55.

“This will be a responsible budget for Australians who are doing it tough, and central to that, probably the centrepiece of the budget, will be a cost of living package,” Dr Chalmers told Sky News on Sunday.

“(The package) is broader than what has been speculated on which prioritises the most vulnerable people.”

The federal government is introducing changes to the PRRT which would see offshore LNG producers limited in the amount of deductibles they can claim. Picture: Supplied/Inpex Australia

The PRRT overhaul – which draws on recommendations of two separate reviews – will ensure oil and gas companies pay their “fair share”, and will come into effect from July 1.

One of the major changes will be to limit the proportion of PRRT assessable income on LNG projects that can be offset by deductions to 90 per cent.

Other changes, to be introduced over the next two years, include equalising the treatment of notional upstream and downstream entities, meaning that losses will be split evenly rather that attributed entirely to the upstream entity.

“It’s been clear for some time that the PRRT isn’t up to scratch,” Dr Chalmers said.

“These sensible changes see the offshore LNG industry pay more tax, sooner.

“They also deliver a fairer return to the Australian people from the resources they own, provide certainty to industry and ensure Australia remains a reliable trade and investment partner.

“These changes will make a meaningful contribution to the Budget that we hand down on Tuesday night, helping to support our efforts to get the nation’s finances back on track, fund vital services and provide responsible cost-of-living relief.”

“These sensible changes see the offshore LNG industry pay more tax, sooner.” – Treasurer Jim Chalmers. Picture: NCA NewsWire / Martin Ollman

Leading industry group APPEA said the changes “aimed to get the balance right” between the “undeniable need” for a strong gas sector, and the need for a more sustainable national budget.

“The announcement today will provide greater certainty for our industry to consider the future investment required to maintain both domestic and regional gas supply security for our customers,” chief executive Samantha McCulloch said.

“Our investments support tens of thousands of Australian workers and deliver substantial economic benefits to communities across Australia.”

Despite APPEA calling for a bipartisan approach, Deputy Liberal leader Sussan Ley said the government should be cautious about intervening in the market.

“When you intervene in the energy market, you distort the market,” she told Sky news.

“So the real question is, will those changes incentivise investment? Will they increase supply or will they simply distort the market … and lift inflation even higher in the energy market than it already is?”

Originally published as Budget 2023: Higher taxes for offshore gas industry to fund cost of living relief